Yen weakness continues to steal the show, we take a look at why.  All currencies are stronger vs the USD except for JPY, which resumes its fall as oil soars and even as yields pause. US November CPI is due up next, with headline seen +5.3% and core at 4.0%. 


Yen weakness continues with multiple crosses breaking key levels. USD/JPY continued to fresh three-year highs, sustaining the bid even as stocks slipped and 30-year yields fell 6 bps.

It's clear that rising global yields and yen crosses move in tandem but a better question is why both are climbing. That two main drivers are rising inflation worries and ongoing supply bottlenecks, which are feeding back into each other. Add in the ongoing energy price shock and there's a strong case for the reflation trade.

One unheralded factor is that covid appears to be subsiding globally. Another wave of the virus was baked into global growth projections but optimism is rising that we've seen the final thrust – at least outside of China and the antipodeans which remain at high risk due to limited natural immunity.

Whatever the driver, the charts of yen crosses are increasingly convincing. CAD/JPY on Monday rose to the highest in three years and is now threatening the 2018 high.

Looking ahead, the US CPI report is due out at 1230 GMT and expected to show year-over-year remaining at +5.3% with core remaining at +4.0%. If you recall back to last month, core inflation undershot expectations and it briefly weighed on the US dollar. That victory lap for team transitory didn't last long though as the dollar quickly resumed its climb.

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